China Defends Rare Earths Export Restrictions

27 June 2012

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Last week, China publicly rejected assertions that the country's export controls on rare earth elements were designed to protect local industry. At a press conference in Beijing, Su Bo, the country's vice-minister of industry and information technology, insisted that the export curbs have been placed to protect the environment and are in line with WTO rules.

In March, the US, EU, and Japan filed WTO complaints against China, claiming that export quotas on 17 rare earths - minerals used to produce goods such as, hybrid cars, weapons, and mobile phones - were in violation of its commitments at the global trade body. (See Bridges Weekly, 14 March 2012) Holding photos of landscapes decimated by the rare earths extraction process, Su rejected accusations that protection of the environment was an excuse to limit rare earth supplies to foreign competitors.

"The government is strengthening the management of the industry to protect the environment and resources, which is beneficial for the sustainable development of the industry and totally conforms to WTO regulations," Su said. "The protection of the environment is never a pretext for gaining advantage or increasing economic returns."

Mining rare earth minerals is widely known as being damaging to the environment. Beijing says that in order to help minimise the environmental impact, it has implemented a range of policies, including production caps, export quotas, stricter emission standards, and higher resource taxes. The US, EU, and Japan, however, assert that export restrictions increase rare earth prices for foreign companies and give Chinese buyers and high tech manufacturers an unfair advantage.

Brussels says that China's quotas are not the most effective way to help protect the environment and suggests that Beijing look for alternate approaches that do not negatively impact foreign industries.

"The EU supports and encourages all countries to promote an environmentally friendly and sustainable production of raw materials. However, the EU believes that export restrictions do not contribute to this aim," the EU said in a 13 March statement.

While China holds some 30 percent of the world's rare earth deposits, it accounts for more than 90 percent of production. The US, Canada, Australia, and other countries have rare earth deposits but stopped mining in the 1990s due to lower cost ores provided by China as a consequence of lower environmental requirements in the Asian country. Recently, Su stated that other countries with rare earth resources should help contribute to the global supply.

The first step of the WTO dispute process was initiated on 25 April when the US, EU and Japan requested consultations over the matter at the WTO. The complainants have recently requested a panel, which is likely to be established before the end of July. In February this year the WTO's Appellate Body sided with the US and EU in a similar case, rejecting China's export restriction system on certain raw materials as WTO incompatible.